If you’re thinking about becoming your own boss then one of the simplest and most effective ways of starting is to set yourself up as a Sole Trader. To make it EVEN simpler, we’ve written a top ten checklist to get you started. These are in no particular order but all important considerations, from bank accounts to expenses and registering for VAT.

It at any point you feel like you need further guidance, speak to one our qualified accountants on 0207 096 2659. Right, lets get started!

Number 1: This is a fun one… pick a name!

This is the name you’ll be using for your business for a long time so give it plenty of thought. It may be your own name, a description of what you do or could be something completely creative. You won’t need to register it, but you will include it on all official paperwork so make sure it’s something you’re happy with. There are just a few rules when choosing your name:

• You cannot include the words ‘limited’, ‘Ltd’, ‘limited liability partnership’, ‘LLP’, ‘public limited company’ or ‘plc’
• You cannot use a word or expression considered ‘sensitive’ or imply a connection with government or local authority, unless they have given you permission to do so
• You can’t use anything offensive
• You can’t use the same name as an existing trademark so do your research and make sure it doesn’t already exist. You can do this by searching the UK Intellectual Property Office (IPO) In addition, if you need a website you’ll want to check that your domain name isn’t already taken, which leads to…

Number 2: If you want a website, register the domain name when starting out

You don’t want to choose your business name and three months later discover someone else already has a website with that name. Checking that a domain name is available goes hand in hand with choosing your business name if you want an online presence. You don’t need to have a website built immediately, just make sure you buy the name so no one else can use it for their website.

Number 3: Register for self-assessment

Once you are a sole trader, you’ll need to register with HMRC. It’s simple and free to do and is the means by which you’ll pay your income tax and national insurance moving forward.

The most straightforward thing to do is to register as soon as you start trading and HMRC will send you a notice each year to tell you they are expecting a return. But, you can wait, as long as you do it by the 5th October following the end of the tax year during which you started the business.

If you don’t register in time, it’s likely that HMRC will issue penalties based on late payment of taxes. Fines vary depending on whether HMRC think your failure to register was accidental or deliberate. If considered accidental they can be 30% of the amount of tax owed, or if deliberate 100%. HMRC will also add interest to any amounts paid after the proper due dates.

If you do miss the deadline, make sure you let HMRC know straight away to try and mitigate any penalties. Don’t just hope HMRC won’t notice, it’s always best to be up front and honest with them.

Number 4: Open a separate bank account

This really goes hand in hand with Number 3. While, as a sole trader, you are not considered a separate entity from your business and so a separate bank account isn’t a legal requirement – it makes a great deal of sense to open a separate account.

The advantages of doing so are that keeping records is much easier – you’ll know that everything in that account relates to your business so completing your annual accounts and Self-Assessment Tax return will be straightforward and far less time consuming.

There are plenty of banks out there that offer great solutions for small businesses, particularly banks like Mettle (part of the NatWest Group) who offer free banking (as long as we meet a few requirements).

Number 5: Be clear on what records you need to keep

If you start your business on the right foot, you’ll be making your life easier from thereon! As a sole trader, it isn’t complicated, you just need to stay on top of it. Keep records of your business income and expenses (which will be made much easier if you set up a separate business bank account):

• All sales and income
• All business expenses
• If you’re VAT registered, your VAT records
• If you employ staff, your PAYE records
• Any grants you may have claimed
• Your personal income (all sources of income will need to be included in your self assessment, even if you have already paid tax at source!)

While you don’t need to show these to HMRC when filing a tax return, you’ll want them to be accurate so you can work out your profit or loss for the tax return. And, should HMRC ever ask for them, you’ll have them to hand. You need to keep records for at least 5 years after the tax year they relate to.

Number 6: Check if you need any licences or insurances

This will only apply to certain businesses but check before you begin trading that you don’t legally need a particular licence or insurance policy. Failing to have one could prove extremely costly.

In most cases, however, it is still worth having insurance just in case any clients take legal action against you and your business.

Number 7: Make yourself familiar with what is considered a business expense

It’s in your best interest to claim all legitimate business expenses. These could be travel expenses, associated costs of working from home, business rates, equipment that you need to trade, advertising costs, rent etc. You’ll soon discover that there are several costs associated with running a business that you may not have anticipated, and HMRC allows you to claim many of them back – so make sure you do!

Number 8: Think ahead regarding your tax bill

Because sole traders don’t pay their tax and national insurance from their salary every month as most employees do, at some point you will have a tax bill to pay.

If you are unsure as to how much you should be putting aside, it would be well worth taking professional advice (even if this comes at a cost) to ensure you are at least aware of the tax and national insurance that may be due.

Number 9: Decide if you want to be VAT registered

As soon as your ‘VAT’able’ income exceeds the VAT registration threshold (currently £90,000) in any 12-month period, you must register for VAT. Businesses with a turnover below the threshold may, however, still decide to register for VAT as it may be in their best interests to do. Once you register you’ll need to start charging VAT on all of your supplies (unless exempted), file VAT returns and pay any VAT owed to HMRC, usually on a quarterly basis. What you owe will be the difference between the VAT you have charged on your supplies of goods or services and the VAT you have been charged on your purchases – if you have been charged more than the VAT you have charged your customers then you will be due a refund.

Number 10: You can change your mind!

This might seem like an odd one but it’s worth pointing out.

Starting off as a sole trader doesn’t mean you can’t change your mind and at a later date and become a partnership or limited company. Likewise, if you choose to be VAT registered and later decide you don’t need or want to be, you can deregister and vice-versa.

A lot of new businesses start out as a sole trader and change to a limited company when the business grows such that it is more beneficial to be limited.

This is your business, so as long as you are working within the law, you can trade in the way that best suits you and this may change over time. We’d advise that you speak to a small business accountant as they’ll be able to advise you as to which business model would be best for you, looking at both the tax and commercial implications.

Number 11… Yes I know we said 10! Ask for help if you need it!

This might sound obvious, but since setting up Integro Accounting in 2013, we’ve seen a large number of cases whereby clients previously tried to go it alone, and then get lost in a sea of questions and issues concerning their tax return and the support they need. If you are struggling, seek professional advice.

At Integro we vet and recommend some of the best in the business. So if you think you require: legal advice, insurance cover, health cover, financial advice, a business bank account or even a mortgage advisor, visit our recommended partners hub for more support.

Also, as a company, we offer a FREE no obligation virtual or face to face meeting to those starting up. Meet with a qualified small business accountant to discuss your needs, and if you feel either one off or ongoing support is for you, we can tailor an accountancy package to suit you. Our accountancy packages will include everything you will need as a sole trader. Dependent on the volume of support you need, you can have full assurance that we will provide the right service for you and your business.

Enquire today or find out more about our Small Business and Sole Trader Accountancy Service.